One of Brookdale Senior Living’s (NYSE: BKD) most vocal shareholders is again pushing the senior living operator to realize more upside from its valuable real estate.
Stamford, Connecticut-based Land and Buildings Investment Management LLC wrote in an open letter to shareholders that Brookdale’s real estate is potentially worth double its current share price, and lamented that the company hadn’t yet taken its advice.
Brookdale owns 358 of the 1,010 senior living communities in its portfolio, according to a recent investor document. Land and Buildings held 2.7% of Brookdale’s stock as of last October.
“With Brookdale’s stock trading in the $9 to $10 range, and the real estate value of the company potentially double its stock price based on recent transaction comps and the likely bottoming of fundamentals this year, significant upside remains to be realized,” Land and Buildings founder and Chief Investment Officer Johathan Litt wrote in the July 9 letter. “Therefore, we believe any shareholder feedback the company receives should and will be taken seriously.”
The activist shareholder tasked the Brentwood, Tennessee-based senior housing provider’s investment committee with finding ways to maximize the value of Brookdale’s owned real estate, particularly in light of the company’s recent lease negotiations with Welltower Inc. (NYSE: WELL) and Ventas, Inc. (NYSE: VTR).
Additionally, Land and Buildings urged the operator to further eliminate lease structures, which may include converting leases into management contracts to ease up pressure on lease liability while giving landlords additional upsides.
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A representative for Brookdale declined to comment when reached by Senior Housing News, but there are signs the operator also wants to unlock more value from its real estate. The company has indicated it would like to shed some underperforming or non-strategic assets, and could shrink its senior housing portfolio by as much as 20% in the next three years.
Other changes recommended by Land and Buildings included declassifying Brookdale’s board of directors, refraining from expanding the board past nine members, swapping in two new members with health care and real estate investment trust (REIT) expertise, and adding a new finance-oriented member to the board’s investment committee.
Though Land and Buildings has in the past pressured Brookdale to boost transparency and negotiate a partial or complete sale of the company, the senior living operator has seemingly not taken heed.
“While we are disappointed with the lack of urgency, we remain hopeful that the board will seriously consider the views of its shareholders, including those set forth above, and that it will work to improve value on behalf of all Brookdale shareholders,” Land and Building’s letter concluded. “We nonetheless must continue to monitor the company, and evaluate all options available to maximize shareholder value.”
Brookdale’s share price hovered around $9.74 by mid-day Monday.
Written by Tim Regan